24 Trillion Reasons to Buy Gold 47 comments
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It is a worst case scenario, but Neil Barofsky, the inspector general for the Troubled Asset Relief Program, has said the bailouts, bank rescues and other economic lifelines could end up costing the federal government as much as $23.7 Trillion. To put this number into perspective, it is nearly double the nation’s entire economic output for a year, more than the cost of all the wars the United States has ever fought combined and the most the federal government has spent on any single effort in American history. It is about $80,000 for every U.S. citizen.
Printing and borrowing $800 billion to hand over to the banks with no strings attached never seemed like a good idea. We wrote about it back in October of 2008 in this article. And despite some 80% of Americans being against the bailouts, our elected officials decided to hand over taxpayer money to their banker buddies anyway.
A soon-to-be released report by special inspector general Neil Barofsky finds:
Many of the banks that got federal aid to support increased lending have instead used some of the money to make investments, repay debts or buy other banks. It is not clear whether the report will also disclose the banks’ use of the bailout money to pay executives fat bonuses which they used to buy gold toilets and prostitutes, and to lobby Congress to stop any meaningful reform.”
It is infuriating and does not bode well for the U.S. dollar or our economic future. There is a point on the horizon when foreign governments and banks are going to stop buying our debt and holding our dollars. First we had news that the 2009 deficit had already topped $1 Trillion for the first time in history. As if that wasn’t bad enough, the sticker shock from this latest estimate is really going to upset some of our Eastern trading partners.
A figure like $24 Trillion just might be the breaking point for an already furious Chinese administration that has thus far been willing to support the dollar and our government’s spending binge for fear of losing American consumer demand. The tipping point comes when it is no longer worthwhile for China, Japan and others to continue financing America and propping up our sick economy. While I used to believe that point was still a few years away, it now seems to be rushing upon us full throttle.
This of course is going to lead to a massive sell off in the dollar and fireworks for precious metals. If you aren’t already invested in gold and silver, this is likely your last chance to buy gold for under $1,000 and trade in those paper promises for something of real tangible value that cannot be printed out of thin air. When the dollar collapse begins, I expect the drop to be fast and furious. Savvy investors will want to be positioned well before the bottom falls out.
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This article has 47 comments:
The $23.7 Trillion Backstop Heist
"dear taxpayer, (you) are being robbed by the Too Big To Fails and the Reserve Banking System. Much more info contained in this report, which attempts to grasp just how pervasive the involuntary taxpayer support of Wall Street is, including a great overview of the Federal Reserve Banking System
look for a 1 to 3.9 reverse "split" on the dollar.
Stocks and real estate are the safe haven.
Tell the transfer agent/ registrar you want physical possession of the stock certificate
I am buying all pullbacks for years to come.
It's not fair though to lump in all rich people with rich Wall Street people.
Most wealthy people have not benefitted from the bailouts and will be expected to pay the lions share of the bill when this bank job is over.
I dont know what the answers are, I'm not sure if anyone does. Its like trying to turn the Titanic before it hits an iceburg when you know you dont have enough room.
Its almost like they know that its fruitless to resist the debt bubble its unsurmountable so lets go out with a blast.
Nothing is making common sense anymore.
"We're from the IMF and we're here to help".
On Jul 21 03:26 PM conceptwizard wrote:
> There is a emminent collaspe coming, it is the only thing that can
> reset this unsurmountable debt load. It cant be paid back, it is
> increasing daily and will drown us all in time.
>
> I dont know what the answers are, I'm not sure if anyone does. Its
> like trying to turn the Titanic before it hits an iceburg when you
> know you dont have enough room.
>
> Its almost like they know that its fruitless to resist the debt bubble
> its unsurmountable so lets go out with a blast.
>
> Nothing is making common sense anymore.
I'd aim for others (especially oil and aluminum, note CNOOC and Chalco), and keep in mind that SILVER is what dominated the Chinese mindset for centuries, not gold.
On Jul 21 03:26 PM conceptwizard wrote:
> There is a emminent collaspe coming, it is the only thing that can
> reset this unsurmountable debt load. It cant be paid back, it is
> increasing daily and will drown us all in time.
>
> I dont know what the answers are, I'm not sure if anyone does. Its
> like trying to turn the Titanic before it hits an iceburg when you
> know you dont have enough room.
>
> Its almost like they know that its fruitless to resist the debt bubble
> its unsurmountable so lets go out with a blast.
>
> Nothing is making common sense anymore.
On Jul 22 11:12 AM WillTrade wrote:
> "imminent" and "insurmountable" look them up.
While it seems like a lot, it's less than half the net worth of the US, and would only come into play if the asset values of the US were to fall by more than 50% and if inflation-unadjusted income were to fall by more than 50% such that these guarantees would be called on. This would be a major deflation, and should it occur would represent the greatest monetary failure- or the greatest central banker scam- in history.
Given the inflationary goals of the Fed and likely voter response to a hyperdeflation, I don't see this happening anytime soon.
BTW- what would be the value of a US dollar be without the US government "backstopping" its value by fighting counterfeiting, controlling the money supply, and providing for the common defense of a nation that can create goods and services purchasable with said dollars?
A nationalized bank, supported by the printing press, can stick around for a long, long time.
Also, before any investors out there start buying gold/silver, remember that commodities fell by 50% during the last crash, so you need to wait for the crash to play out a little before buying. If the dollar were to fall at the same time, which I don't think it would, then that would provide support to commodities. Without that contemporaneous calming condition, commodities would likely crash, again. In addition, the Treasury market is, unbelievably, still the safe haven even after all this and even after considering the epicenter.
arabianmoney.net/2009/.../
Break out the Tommy guns!
As farf as the $24T, that'd require every piece of debt guaranteed by the government to default and the principal payments required. That is a foolish idea.
Of course the biggest fool is one in the white house.
loss reserves,non performing loans and net chargeoffs mean???
Also do you know the concept of CLTV???
On Jul 23 02:35 AM MarkitWacha wrote:
> The commercial real estate market could be the last push that sends
> banks over the edge. I don't think that Citibank will have any equity
> left after the reality hits. It will be completely nationalized,
> as will Bank of America.
>
> A nationalized bank, supported by the printing press, can stick around
> for a long, long time.
>
> Also, before any investors out there start buying gold/silver, remember
> that commodities fell by 50% during the last crash, so you need to
> wait for the crash to play out a little before buying. If the dollar
> were to fall at the same time, which I don't think it would, then
> that would provide support to commodities. Without that contemporaneous
> calming condition, commodities would likely crash, again. In addition,
> the Treasury market is, unbelievably, still the safe haven even after
> all this and even after considering the epicenter.
On Jul 21 09:26 PM tradertom wrote:
> So, out of the 24 trillion you talk about in the article, you account
> for 750 billion. The 24 trillion seems like a stretch when you can
> only account for such a small portion. What about the other 23.25
> trillion? Where did that go?
No typo here, he said "54 TRILLION DOLLARS!" I can only imagine what it is now.
On Jul 21 11:22 PM Ricard wrote:
> I think instead of gold, the Chinese will aim for commodities with
> more utility. Why buy gold when the only thing it anchors are sick
> economies?
>
> I'd aim for others (especially oil and aluminum, note CNOOC and Chalco),
> and keep in mind that SILVER is what dominated the Chinese mindset
> for centuries, not gold.
Hocus pocus magicus Bernankes, Timothy Piffany, Paulsonian Poof!
All gone.
Problem is that jobs go away, homes are foreclosed and left empty to have the copper ripped out and trashed by squatters, commercial real estate collapses, and States can't pay their bills.
Then the welfare and WIC dries up. Unemployment goes up. People are restless, scared, and hungry/cold/hot and don't have the usual comforts. Riots start.
Suddenly, the zeros or numbers you toyed with on the spreadsheet or that people thought were there don't have any meaning. You can fling a cow pie like a frisbee but it's still B.S.
The powers that be, by delaying a collapse at the source of the speculation and corruption, have pushed it down to the average citizen. Sooner or later that collapse will manifest itself physically.
So now, we must all pay the price for this...in an ever smothering tax burden that forces the consumer to save just to pay the government!!
Well, at least our spending will grow something.....
On Jul 23 07:21 AM Peter Cooper wrote:
> Why I would not normally mention Rich Dad on seekingalpha he is the
> doyenne of the retail investor and here he is on TV saying gold is
> going to $15,000 an ounce. People do tend to follow him and this
> is exactly how a retail gold boom would start, see:
> arabianmoney.net/2009/.../
Woo-hoo! All aboard the Tinfoil Hat Express. "arcane European cliques" with their "Ticino banks" (ah yes, that World Financial Center, Ticino)..."inflation spawned by deflation" (or is it deflation triggered by hyperinflation? I forget), "information kept in prison" (with manacles????)
All aboooooaaardd!
On Jul 23 07:31 PM AuGod! wrote:
> A massive devaluation of the US$ is probable with concommitant competitive
> devaluations thus sending price inflation to unprecedented levels
> globally. That is the medicine. The disease is inflation spawned
> by deflation and the cause is hoarding by banksters and the terra
> incognita of fast and cheap money back-channelled through direct
> government monetarist interventions. The stock market rally is a
> symptom of the problem and a tipping point that the problem persists.
> The price of gold bullion, a small market dwarfed by the general
> market, is thwarted by paper issues for which there is probably insufficient
> physical gold to cover. Still, when the stock market tanks, which
> it must, (it may even be planned) much gold and other liquid assets
> will be thrown over in a mad rush to deleverage and cover. It is
> then that the realization will come to the financially savvy, that
> physical gold's liquidity is more important than its SPOT price.
> That SPOT price could be extremely high. But that value (of the metal)
> will not be obvious immediately during the rush to cover. It will
> only become obvious after it all shakes down and people get up off
> the floor, dust themselves off and realize how much pre-hyperinflationary
> or devaluation FIAT was spent on < US$1000. per ounce gold bullion
> by entities with strange names. Many of those names will be on the
> rolls of very old, arcane European cliques through their private
> Ticino banks. The "end" always precedes a beginning. That is an Historical
> fact. We are approaching the event horizon. Information is fuzzy
> and/or is kept in a prison. Everyone here at SA knows or suspects
> this but drifting through ambiguity is no way to go through life.
> My bet is on physical gold because my "best" information supports
> that conclusion.
People in other parts of the world have already started to question the value and safety of our green pieces of paper, and are only willing to exchange fewer and fewer of their own pieces of paper for our paper.
Gold, silver and platinum have no such issues.
Bailing out failed car companies, providing health care to every citizen and regulating the crap out of every business in the country are NOT functions of government.
When we get back to basics and a smaller government, we'll have a stronger dollar.
On Jul 23 12:55 AM Dirk McCoy wrote:
> $23.7 Trillion is not the planned cost of the bailout (which is probably
> less than $.3 Trillion); it is not the sum of government loans that
> have been given out (which is $3 Trillion); it is the sum total of
> all loan guarantees the Federal Government has signed on to guarantee.
>
>
> While it seems like a lot, it's less than half the net worth of the
> US, and would only come into play if the asset values of the US were
> to fall by more than 50% and if inflation-unadjusted income were
> to fall by more than 50% such that these guarantees would be called
> on. This would be a major deflation, and should it occur would represent
> the greatest monetary failure- or the greatest central banker scam-
> in history.
>
> Given the inflationary goals of the Fed and likely voter response
> to a hyperdeflation, I don't see this happening anytime soon.
>
> BTW- what would be the value of a US dollar be without the US government
> "backstopping" its value by fighting counterfeiting, controlling
> the money supply, and providing for the common defense of a nation
> that can create goods and services purchasable with said dollars?
Is that why, worldwide, central banks hold tens of thousands of tons??? They're all jewelry manufacturers?? I think not.
It's a store of value.
On Jul 24 07:34 AM datadave wrote:
> i've listened and acted upon Gold Bug Fever and lost a chunk of change.
> No More. Inflation will come (but when?) and like it or not, gold's
> main utility is for Jewelry, not currency. I have the GLD prospectus
> and it says the same thing. Ag. commodities, energy, copper, mat'ls
> in general are more likely to have a market than gold. Gold as a
> 'hedge' maybe but don't expect much earnings from it in the near
> future.... maybe long term, but still it's a 'luxury' not a necessity.
I seldom do, but will reply, in this instance to poster Anandakos.
Anandakos, thank you for your critique and insight.
Your question: "... information kept in prison" (with manacles????)" I used the terms "imprisoned" with the term "event horizon" because as we all know from elementary level physics, proximity to a black hole results in less and less escaping until light itself is trapped. I perhaps too quickly, applied that parallel to our current need (and lack) of verifiable information.
As to your remarks about Tinfoil Hat Express, I apologize and ask forgiveness. If I may, Ticino is Switzerland's third largest financial center after Zurich and Geneva. (According to Wiki the banking industry alone has 8,400 employees and generates 17% of the gross cantonal product.) But again, I was alluding, albeit awkwardly to Italy and the Ticino's shared language, culture and very close ties in respect to the financial industry. Why? As you and all will know Italy’s financial police (Guardia italiana di Finanza) seized US bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland's Ticino Canton. It was an oblique reference and for that I express my sincere regrets.
Regarding your remarks vis "inflation spawned by deflation" (or is it deflation triggered by hyperinflation? I forget)", <close quote> - I would say only that if the excess US$ deployed to lubricate the liquidity spigot are not drawn from the system in a timely manner, price inflation will follow. That happens when too many dollars are chasing too few products. Yes, much wealth went to money heaven, but again, we can't quantify with the precision necessary to be comfortable with government assurances that there will not be inflation because the Government doesn't know either.
In any case, your remarks are not focused on my central message which I will simplify. Namely, to expect a decrease in US$ buying power (sort of like the 45% debasement since 2000). To plan (and prepare) for a new round of general market volatility downwards. Expect the same vis gold bullion initially, as many sell the metal, to cover other losses. Then expect gold to pop thus reflecting what some Tinfoil's know now and many rich European folks have known for centuries. Gold is a very liquid asset that comes with no counterparty liability.
I regret that I cannot match wits with you or your high prose Anandakos. I am a simple man who hates ambiguity and seeks Alpha when it comes to my hard earned and too easily debased cash.
As long as the financial system stays intact, you have supply-demand fundamentals working in your favor for many of the industrials.
www.planbeconomics.com.../
Could be that Ag isn't the only "precious metal" destined for "industrial" use.
Disclosure: deeded mineral rights, CA motherlode, 165Koz high grade reserves, <300' subsurface.
On Jul 23 02:10 PM Boot wrote:
> Gold is fine, but Silver Is Divine. With its many uses, and with
> the current market (pressures) distorting it to the low side, it
> has more upside potential than gold IMO. Oh I have gold, bullion,
> miners etc, but increasingly more silver.